As we enter another season of climate disasters, Canadians brace themselves in the hopes that their properties and lives will not be uprooted — or if they are, that recovery will be swift.
After any disaster, governments and non-profits quickly mobilize to assist those in need. Take Jasper and the July wildfire for example, where evacuation centres have been established, and the Canadian Red Cross and provincial government are providing financial resources to affected households. These response mechanisms are crucial for evacuees as they scramble to secure safe lodging and support in the chaos of a mass evacuation, but they also raise an important question: where do private insurance companies fit in?
A home insurance policy is known as a “peace of mind” contract, designed to protect policyholders against financial pressure and distress. Insurers can, and arguably should, advance funds (typically $10,000 to $30,000), when a home is significantly damaged to provide for emergency costs upfront. These advances can be accounted for against the claim as it progresses, and needs become less dire. This approach gives families the stability they need to begin recovery in earnest, alleviates some of the burden on government and non-profit organizations’ resources, and saves those resources for families who are underinsured.
This was a standard, but delayed, response from most insurers after the Fort McMurray wildfires in 2016. However, having met with several families from Jasper to assist with their insurance claims, we are now seeing delays in these cash advances.
While there are factors that affect insurers’ ability to advance funds quickly (such as known damage levels), their failure to do so leaves a void that government and non-profit organizations have to fill. If all levels of government and organizations such as the Canadian Red Cross can mobilize quickly to provide emergency funds and resources, why can’t insurers do the same?
Being forced from your home under a wildfire evacuation is a nightmare scenario, and without emergency funding it becomes a source of long-standing financial distress. While insurance policies can’t protect us from emergencies occurring, they are supposed to protect us from the devastating financial effects that otherwise result.
What’s more is that insurers actually benefit from dragging their feet on providing advances. For example, an insurer will use the principle of barring double recovery to reduce payouts by any amounts received from governments or non-profit organizations. In essence, taxpayer dollars and generous donations end up subsidizing insurance companies instead of going directly to those who need help the most.
I have seen this scenario play out time and again and it needs to change.
Canadians need to push for accountability from their insurers countrywide to provide early and fair advances to alleviate the drain on public funding. Alternatively, organizations and governments need to push to reclaim these funds from the insurers when a claim is successfully processed, restoring funds for Canadians in need rather than leaving the company with the windfall. This change is not just a bureaucratic adjustment; it’s a crucial move toward fairness and justice for those who rely on these funds.
We Canadians are a generous and resilient people. Together with governments, non-profit organizations and insurance companies, we can create the safety net that our communities need to bounce back from climate disasters.
Fy Virani is the founding partner of Virani Law, a firm specializing in disaster-related insurance claims.